Is Olympic Network a Gold Medal Stock?

By Charles Passy

Does record Olympic viewership on NBC translate into a gold medal for Comcast (CMCSA), the broadcast behemoth’s majority owner?

Raymond Boyd/Michael Ochs Archives/Getty Images

That’s the question some investors may be asking, given the network’s generally impressive showing — at least in terms of raw numbers — since the start of the London Summer Games last week. NBC reached a record-breaking 40.7 million viewers with its tape-delayed presentation of Friday’s opening ceremony, representing a 17% spike from the Beijing Olympics in 2008. It also attracted 28.7 million viewers on Saturday, another record. (Not that the coverage itself hasn’t merited its share of criticism, as evidenced by this story in the Los Angeles Times.)

But with Comcast, which acquired its majority share (51%) of NBC from General Electric in early 2011, already trading near its 52-week high of $32.78, some analysts say it’s doubtful the Olympics will have a significant impact in the short term, considering the hefty sum of $1.18 billion paid for securing the rights.

In the longer term, however, some analysts say it could herald a turning-of-the-corner — particularly as Comcast, the country’s largest cable and internet provider, emphasizes its “TV everywhere” philosophy of building an audience beyond the TV set itself and connecting its broadcast and online audiences. With the Olympics, NBC is taking a split approach to coverage, emphasizing live streaming as much as the evening telecast.

“You see the rationale working. This is an early proof of the concept,” says Todd Mitchell, an analyst with Brean, Murray, Carret & Co. who recently reiterated his “buy” rating on shares of Comcast, with a target price of $35.

It won’t be easy for NBC to make back its billion-dollar investment in the Olympics, say experts – at least through advertising dollars. Then again, analysts say the Olympics aren’t necessarily about return-on-investment in the traditional sense. It’s not just how the games position Comcast’s “TV everywhere” strategy. It’s also how they let NBC use valuable airtime to promote its fall lineup. And that’s where the record Olympic audience could really make a difference, says Marci L. Ryvicker, an analyst with Wells Fargo Securities.

“More viewers means more buzz” for future shows,” says Ryvicker.

Still, Comcast faces plenty of challenges with NBC, which ranks third among the four major networks with the coveted audience of 18-to-49-year-olds. Ryvicker believes NBC is on a roll — not just because of the Olympics, but also because of its broadcast earlier this year of the Super Bowl, which brought in a record viewership of 111.3 million. But it still doesn’t have an “American Idol” in its lineup (like Fox, the No. 1 network). (SmartMoney and Fox are both owned News Corp.) And analysts say it hasn’t really shown a true direction, programming-wise, since the Comcast acquisition, although there’s an expectation that will change with the coming season.

Either way, tens of millions of Olympic viewers still count for something. “It’s not a huge driver for the stock, but for investors, it’s a positive,” says Ryvicker.

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